What determines your required Google Ads budget?
There is no standard answer to the question of how much budget you need. This depends on various factors that we encounter in our daily practice:
Type of product or service
The type of product or service you offer has a major impact on your budget. With products that have a lower purchase threshold (such as clothing), we see that consumers are quicker to make a purchase than with more expensive, complex services or products such as solar panels.
An example: a clothing webshop with an average order value of €100 has a completely different conversion pattern than a company that sells solar panels for thousands of euros. With the latter, the purchasing process is longer and more complex, which means you need more touchpoints before someone converts.
Competition in your market
Competition in your market partly determines click prices. The more competition there is, the higher the click prices can be. In some markets, you pay a few cents per click, while other sectors (such as insurance or legal services) have click prices of several euros.
Do you have an SME and are you curious to find out whether you too can achieve SEA success? Find out in our blog about SEA success as an SME.
Geographic targeting
Your geographic targets also play an important role: do you want to be visible locally, regionally, nationally, or internationally? The larger your target area, the more budget you will need to make a sufficient impact. This factor is often underestimated, but it can make a big difference in your required investment. At Reward, we see that local campaigns with a limited geographical radius are often more effective with a smaller budget, while national campaigns require significantly more resources to achieve the same visibility. This is because the reach is greater and there may also be more competition in different regions, which can affect click prices.
Your objectives
Finally, your objectives largely determine your budget requirements:
- Are you focusing on brand awareness? Then you need a broader reach.
- Do you primarily want to generate sales? Then focus on more specific keywords.
- Are you looking for volume or profit maximization? This influences your bidding strategy.
Return on Investment: what does SEA really deliver?
A question we often get asked is: "What is my return on investment (ROI) from Google Ads?" The answer varies depending on the situation, but we can provide concrete guidelines based on our experience. At Reward, we always take the profit margin of a product or service as our starting point. Let's take a simple example:
- You sell a product for €100.
- You have a profit margin of 50%, so €50 profit per sale.
- You decide that you want to invest 10% of your profits in marketing, so €5 per product.
In this scenario, a conversion (purchase) via Google Ads should cost you a maximum of €5 to remain profitable. If we then calculate backwards, we can determine how many clicks you can "buy" and what your CPC (cost-per-click) should be.
Conversion rate as key data
With service providers, it often works differently. Suppose you offer solar panels and an average customer brings you €3,000. Perhaps only one in three people who fill out a contact form actually submit a quote, and one in three quotes is converted into a sale.
We use that ratio to calculate backwards: if one sale yields €3,000, and you need nine form submissions for one sale, then each form submission can cost a maximum of €333 (€3,000 ÷ 9) to break even. Of course, you want to make a profit, so in reality you might aim for €100-150 per lead form.
Volume versus margin
Some of our clients are primarily interested in generating volume and are willing to accept a lower margin, while others focus on achieving a higher margin per sale. This strategic choice largely determines your Google Ads strategy and budget. A volume strategy requires a larger budget with broader targeting, while a margin strategy requires a tighter budget with a focus on specific keywords and strict CPC limits.
The most important advice we give our clients is to start with a realistic budget that allows room for the learning phase, and scale this up as you improve your ROI. Google Ads is not a short-term solution, but a strategic channel that can deliver significant growth when managed properly.
